NCLAT Delhi: Issuance Of Demand Notice U/S 8 Of IBC Is Fulfilled By Documentary Evidence Including Postal Receipt

Background Facts:

Topaki Media Private Limited (TMPL), the Corporate Debtor, provided advertising services by acting as an agent for its clients. Videocon Industries Limited (VIL) utilized TMPL's services, and TMPL in turn sought the Rajasthan Patrika Private Limited (Respondent) to publish the advertisements in its newspapers.

Due to payment delays from VIL, an agreement was made for VIL to settle its debts directly with the Respondent through a barter system, exchanging appliances for the outstanding amounts. As the due amount remained unpaid, the Respondent demanded payment from TMPL and initiated a Corporate Insolvency Resolution Process (CIRP) under section 9 of the IBC.

Mukul Rajhans, the Suspended Director of the Corporate Debtor, filed an appeal against NCLT Mumbai's Order dated 10.08.2023 admitting the CIRP application by the Respondent contending that no Demand Notice under Section 8 of IBC has been served by the Respondent.

Contentions of the Respondent:

The Respondent argued that the Corporate Debtor acknowledges the unpaid invoices and outstanding dues without any dispute. Further, it issued purchase orders on its letterhead, and all invoices were addressed to TMPL without objection. Therefore, TMPL is liable for the outstanding debt.

Moreover, the arrangement to settle payments through VIL's appliances and products was organized by TMPL itself. TMPL regularly coordinated and facilitated these payments. An email from TMPL dated 18.09.2017, to the Respondent, indicated its inability to supply equipment against barter due to GST implications, showing TMPL's active involvement.

NCLAT Verdict:

The NCLAT Delhi dismissed the appeal and held that documentary evidence including postal receipt mentioning the registered address of the Corporate Debtor confirms the issuance of a Demand Notice under Section 8 of IBC.

The Appellate Tribunal examined the validity of the Demand Notice service and noted that the Demand Notice dated 31.07.2018 was sent by registered post on 01.08.2018, to the registered address of the Corporate Debtor to which no reply was made.

Further, documentary evidence, including details from India Post and the postal receipt, confirms the issuance of the Demand Notice, although the addresses on the receipt and acknowledgment are not fully legible or correct. However, this discrepancy is deemed immaterial as both parties had a long-standing business relationship and frequently exchanged numerous emails. The record includes many emails reminding the Corporate Debtor of the outstanding amounts. Additionally, the Appellant actively participated in the proceedings before the NCLT, where they were represented properly.

Furthermore, the TMPL never contested the address to which the demand notice was sent to the Corporate Debtor during the CIRP rather it only challenged the lack of proof of service of the statutory demand notice.

The Appellate Tribunal also referred to the Supreme Court's decision in Greater Mohali Area Development Authority and Ors. vs. Vs. Manju Jain and Ors. which has been relied upon by the Respondent, held that based on Section 27 of the General Clauses Act, 1897 and Section 114 Illustration (f) of the Evidence Act, the service of the notice gets affected when it is sent to the correct address by registered post.

NCLAT observed that unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. Thus, as per these conditions, it cannot be accepted that the service of demand notice was not affected.

In conclusion, NCLAT observed that the Corporate Debtor has admitted the existence of debt with the date of default being 12.12.2015, paid certain invoices, and facilitated the barter agreement in 2017 with no dispute being brought in the CIRP proceedings. Thus, NCLT Mumbai was right in admitting the CIRP petition under Section 9 of IBC against the Corporate Debtor.

Case Title: Mukund Rajhans (Suspended Director of Topaki Media Private Limited) vs. Rajasthan Patrika Private Limited & Anr.

Case No.: Company Appeal (AT) (Ins.) No. 1398 of 2023

Counsel for Appellant: Mr. Vipul Wadhwa, Ms. Kashika Gera, and Mr. Vishal Binod, Advocates.

Counsel for Respondent: Mr. Anand Shankar Jha, Mr. Abhishek Tiwari and Mr. Sachin Mintri, Advocates.

Click here to Read/Download Order